‘Apples to apples’ comparison finds recent state general fund spending growth is modest

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Understanding trends in state general fund spending has become more challenging in recent years, given a number of unusual one-time occurrences with a big impact.

But an apples-to-apples comparison done by Minnesota Management and Budget (MMB) (tucked away on page 61 of the February forecast) shows state general fund spending has been growing relatively slowly, less than two percent a year from FY 2010 to FY 2015.

The MMB analysis adjusts for a number of distorting factors including:

  • Federal economic recovery dollars, which replaced some state funding during FY 2010-11, primarily for education and health care;
  • K-12 funding shifts;
  • Selling off future tobacco settlement payments.

All of these allowed Minnesota to fund services in FY 2010-11 and FY 2012-13 but make spending appear artificially low, especially in FY 2010-11.

Without making these adjustments, Minnesota’s general fund spending appears to have grown by more than 20 percent over the last two budget cycles. That would be mathematically correct, but misleading. A fair analysis requires we properly account for these various one-time pots of money that sustained general fund services in down budget years.

Consider a closer-to-home example. A family was making $40,000 a year, but in 2008 the recession hit and the father got laid off. He took a lower-paying job and mom got a part-time job. Together they were now making $35,000. They got some help from relatives, who helped pay the mortgage and buy food and school supplies. They put off paying bills where they could. By 2012, things got better. The family is now making $42,000.

The family was making $35,000 in 2008 and $42,000 in 2012. We could say that looks pretty darned good, a $7,000 increase or 20 percent in four years. That analysis would be mathematically correct, but a bit ridiculous. A more reasonable assessment is that the family is $2,000 or five percent ahead of where it was before dad got laid off. The family is still in a fragile economic state, given it has several outstanding bills to pay.

Minnesota faces a $1.1 billion revenue shortfall in the next biennium, and still owes school districts $2.4 billion in delayed payments. Tough choices are ahead, but we should have an accurate understanding of what got us there. Relatively modest increases in spending are not the cause.